Donohoe: State’s tax exposure to stay secret

Wednesday, January 10, 2018 - 06:30 AM

Finance Minister Paschal Donohoe has said the authorities will not publicly disclose the handful of top multinationals which account for the lion’s share of the €8.2bn the State collects in corporation taxes, writes Eamon Quinn.

The pledge over continuing confidentiality by the Government and its agencies comes as his departmental officials warned of an increased “exposure” and “vulnerability” to the State’s finances to a small number of multinationals.

The explosion in Ireland’s corporation tax receipts from 2015 has coincided with moves by multinationals to shore up their global tax arrangements, involving transfers of huge amounts of intellectual property rights into their Irish-based firms. Irish units of some multinationals also account for manufacturing carried out at plants in Asia and elsewhere through so-called contract manufacturing accounting deals.

The Irish Examiner in 2016 reported that accounting transfers by Apple gave rise to the huge revisions to Irish GDP levels that led to “leprechaun economics” claims. At a presentation yesterday, Finance Department officials said there were “some concentration issues” with corporation tax because 40% — equivalent to around €3.28bn of the €8.2bn the exchequer took in from the tax last year — was paid by only 10 companies. Those 10 giant firms also account for 6% of total tax revenue flowing to the State, meaning there was a “vulnerability” and “if there was a shock to the corporation tax base there certainly could be a problem”, a senior official said.

Asked whether the Government, given the exposure, should release the names of the top five multinationals who pay the bulk of the tax, Minister Donohoe said he would abide by “the long-standing principle” the identities of taxpayers wouldn’t be disclosed and that he didn’t plan to make the information available on a company-by-company basis. Corporation tax levels over the next few years were sustainable, he said.

Echoing the assessment of the Economic and Social Research Institute, Minister Donohoe said he believed there were no signs at the moment the economy was overheating, and he didn’t expect to see any such signs this year. His decision to “gradually increase” capital spending over the next four years wouldn’t lead to overheating, he said, while investments in infrastructure such as housing and education would boost the “resilience” and competitiveness of the economy. He didn’t see the circumstances in which he would have to reverse the 2018 budget tax cuts, and any additional tax bounty could be used to inject into the rainy day fund and pay down debt, he said.

In the assessment called the Annual Taxation Report, Minister Donohoe and officials were upbeat on the economic outlook, saying headline growth forecasts this year would likely be increased under the next review for the EU in April, while growth next year would expand by 3%. Minister Donohoe reiterated he would decide on the new local property tax regime — frozen at 2013 property valuations until 2019 — later this year. On the €13bn in back taxes the Commission told Ireland it must collect from Apple, Minister Donohoe repeated the Government didn’t agree with the EU’s assessment. He would make further comment when the procurement process to set up an escrow account ahead of appeals was completed early next month, he said.